Monday, January 31, 2011

Existing U.S. sanctions on Burma are based on various U.S. laws and Presidential Executive Orders. This report provides a brief history of U.S. policy towards Burma and the development of U.S. sanctions, a topical summary of those sanctions, and an examination of additional sanctions that have been considered, but not enacted, by Congress, or that could be imposed under existing law or executive orders. The report concludes with a discussion of options for Congress.

The current U.S. sanctions on Burma are the result of a general, but uneven decline in U.S. relations with Burma and its military, the Tatmadaw, since World War II. For the most part, the decline is due to what the U.S. government sees as a general disregard by the Burmese military for the human rights and civil liberties of the people of Burma.

In general, Congress has passed Burma-specific sanctions following instances of serious violation of human rights in Burma. These began following the Tatmadaw’s violent suppression of popular protests in 1988, and have continued through several subsequent periods in which Congress perceived major human rights violations in Burma. The result is a web of overlapping sanctions subject to differing restrictions, waiver provisions, expiration conditions, and reporting requirements.

The United States currently imposes sanctions specifically on Burma via five laws and four presidential Executive Orders (E.O.s). These sanctions can be generally divided into several broad categories, such as visa bans, restrictions on financial services, prohibitions of Burmese imported goods, a ban on new investments in Burma, and constraints on U.S. assistance to Burma.

In addition to the targeted sanctions, Burma is currently subject to certain sanctions specified in U.S. laws based on various functional issues. In many cases, the type of assistance or relations restricted or prohibited by these provisions are also addressed under Burma-specific sanction laws. The functional issues include the use of child soldiers, drug trafficking, human trafficking, money laundering, failure to protect religious freedoms, violations of workers’ rights, and threats to world peace and the security of the United States.

Past Congresses have considered a variety of additional, stricter sanctions on Burma. With a pending parliamentary election supposedly to be held in Burma, the 112th Congress may consider either the imposition of additional sanctions or the removal of some of the existing sanctions, depending on the conduct and outcome of the parliamentary election and other developments in Burma.

Date of Report: January 11, 2011
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Thursday, January 27, 2011

Since 1994, the Chinese government has maintained a policy of intervening in currency markets to limit or halt the appreciation of its currency, the renminbi (RMB), against the U.S. dollar and other currencies. Critics charge that this policy has made Chinese exports to the United States significantly cheaper, and U.S. exports to China much more expensive, than would occur under free market conditions. Some policymakers argue that China’s currency policy is a major factor behind the large annual U.S. trade deficits with China and has lead to the widespread loss of U.S. manufacturing jobs. Some economists have argued that China’s currency policy is disruptive to global economic recovery because it induces many countries to intervene in currency markets in an effort to hold down the value of their currencies against the dollar in order to enable their firms to remain competitive vis-à-vis Chinese firms. Some economists have expressed concern that these actions may worsen economic imbalances and could undermine the world trading system.

From July 2005 to July 2008, the central bank of China allowed the RMB to appreciate against the dollar by about 21%. However, once the effects of the global economic crisis began to become apparent, China halted appreciation of the RMB in an effort to limit job losses in industries dependent on trade. From July 2008 to late June 2010, China kept the exchange rate of the RMB at roughly 6.83 yuan (the base unit of the RMB) to the dollar. On June 19, 2010, the China’s central bank stated that, based on current economic conditions, it had decided to “proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” From June 18 to December 24, 2010, China allowed the RMB/dollar exchange rate to rise by about 2.9%% overall. U.S. officials have criticized the slow pace of RMB’s appreciation, especially given the rapid growth in Chinese exports and trade surplus over the past year, and have urged China to quicken the pace of currency reform and flexibility.

Many members of Congress have urged the Obama Administration take a more aggressive stand against China over its currency policy, including designating it as a “currency manipulator” under U.S. trade law. Several currency-related bills were introduced in the 111th Congress. In September 2010, the House approved an amendment in the nature of a substitute to H.R. 2378, which would have attempted to treat certain fundamentally undervalued currencies as an actionable subsidy under U.S. countervailing duty (which could have resulted in higher tariffs on certain imported Chinese products). The Senate did not consider the bill. In addition to bilateral talks, the Obama Administration has sought to put more pressure on China by attempting to boost multilateral cooperation on addressing exchange rate policies and global trade imbalances.

Many economists contend that a sharp appreciation of the RMB would help to rebalance the global economy, but note that this must be accompanied by lower saving and greater consumption in China. An immediate and sharp appreciation of China’s currency could disrupt its export industries and lead to widespread lay-offs, which in turn could slow its economic growth and reduce import demand. However, if RMB appreciation occurred along with measures to boost domestic consumption, laid off Chinese workers in the export sector would be able to find jobs in other (non-export) sectors, which could help maintain healthy economic growth and boost Chinese demand for imports. While an appreciation of the against the dollar could help boost U.S. exports to China, it could also entail costs to the U.S. economy in the near term. China would not need to buy as many U.S. Treasury securities, which could cause real U.S. interest rates to rise. A more expensive RMB could also mean higher costs for U.S. consumers as well as firms that use Chinese-made inputs for their products. To reduce U.S. external imbalances (including with China), the United States would need to boost national saving.

Date of Report: January 12, 2011
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Despite apparently consistent statements in four decades, the U.S. “one China” policy concerning Taiwan remains somewhat ambiguous and subject to different interpretations. Apart from questions about what the “one China” policy entails, issues have arisen about whether U.S. Presidents have stated clear positions and have changed or should change policy, affecting U.S. interests in security and democracy. In Part I, this CRS Report, updated as warranted, discusses the “one China” policy since the United States began in 1971 to reach presidential understandings with the People’s Republic of China (PRC) government in Beijing. Part II documents the evolution of policy as affected by legislation and articulated in key statements by Washington, Beijing, and Taipei. Taiwan formally calls itself the Republic of China (ROC), celebrating in 2011 the 100th anniversary of its founding. The policy covers three major issue areas: sovereignty over Taiwan; PRC use of force or coercion against Taiwan; and cross-strait dialogue. The United States recognized the ROC until the end of 1978 and has maintained an official relationship with Taiwan after recognition of the PRC government in 1979. The United States did not explicitly state the sovereign status of Taiwan in the three U.S.-PRC Joint Communiques of 1972, 1979, and 1982. The United States “acknowledged” the “one China” position of both sides of the Taiwan Strait.

Since 1971, U.S. Presidents—both secretly and publicly—have articulated a “one China” policy in understandings with the PRC. Congressional oversight has watched for any new agreements and any shift in the U.S. stance closer to that of Beijing’s “one China” principle—on questions of sovereignty, arms sales, or dialogue. Not recognizing the PRC’s claim over Taiwan or Taiwan as a sovereign state, U.S. policy has considered Taiwan’s status as unsettled. With added conditions, U.S. policy leaves the Taiwan question to be resolved by the people on both sides of the Taiwan Strait: peacefully, with the assent of Taiwan’s people, and without unilateral changes. In short, U.S. policy focuses on the process of resolution of the Taiwan question, not its outcome.

The Taiwan Relations Act (TRA) of 1979, P.L. 96-8, has governed U.S. policy in the absence of a diplomatic relationship or a defense treaty. The TRA stipulates the U.S. expectation that the future of Taiwan “will be determined” by peaceful means. The TRA specifies that it is U.S. policy, among the stipulations: to consider any non-peaceful means to determine Taiwan’s future “a threat” to the peace and security of the Western Pacific and of “grave concern” to the United States; “to provide Taiwan with arms of a defensive character;” and “to maintain the capacity of the United States to resist any resort to force or other forms of coercion” jeopardizing the security, or social or economic system of Taiwan’s people. The TRA provides a congressional role in determining security assistance “necessary to enable Taiwan to maintain a sufficient self-defense capability.” In addition, just before issuing the August 17, 1982 Communique, President Reagan offered “Six Assurances” to Taipei, covering arms sales and any U.S. role in cross-strait talks.

Policymakers have continued to face unresolved issues, while the political and strategic context of the policy has changed dramatically since the 1970s. Nonetheless, there has been no comprehensive review of U.S. policy since 1994. Since the mid-1990s, U.S. interests in the military balance as well as peace and stability in the Taiwan Strait have been challenged by the PRC’s military buildup (particularly in missiles) and military coercion, resistance in Taiwan by the Kuomintang (KMT) party to raising defense spending, and moves perceived by Beijing for de jure independence under Democratic Progressive Party (DPP) President Chen Shui-bian (2000- 2008). After May 2008, KMT President Ma Ying-jeou resumed the cross-strait dialogue (after a decade)—beyond seeking detente. With President Obama since 2009, a policy convergence among the three sides has emerged about “peaceful development” of cross-strait engagement.

Date of Report: January 10, 2011
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Wednesday, January 26, 2011

The People’s Republic of China (PRC) plays a key role in U.S. policy toward the Democratic People’s Republic of Korea (DPRK or North Korea). The PRC is North Korea’s closest ally, largest provider of food, fuel, and industrial machinery, and arguably the country most able to wield influence in Pyongyang. China also is the host of the Six-Party Talks (involving the United States, China, North Korea, South Korea, Japan, and Russia) over North Korea’s nuclear program. The close PRC-DPRK relationship is of interest to U.S. policymakers because China plays a pivotal role in the success of U.S. efforts to halt the DPRK’s nuclear weapons and ballistic missile programs, to prevent nuclear proliferation, to enforce economic sanctions, and to ensure that North Korean refugees that cross into China receive humane treatment. Since late 2008, China has been not just the largest, but also the dominant, provider of aid and partner in trade with North Korea.

This report provides a brief survey of China-North Korea relations, assesses PRC objectives and actions, and raises policy issues for the United States. While Beijing still maintains its military alliance and continues its substantial economic assistance to Pyongyang, in recent years many PRC and North Korean interests and goals appear to have grown increasingly incompatible. Increasingly, many Chinese officials and scholars appear to regard North Korea as more of a burden than a benefit. However, Beijing’s shared interest with Pyongyang in preserving North Korean stability generally has trumped these other considerations.

The Obama Administration’s public statements have emphasized common interests rather than differences in its policy toward China regarding North Korea. The United States also has been encouraging China to use its influence in Pyongyang to rein in the more provocative actions by North Korea. China’s interests both overlap and coincide with those of the United States, but China’s primary interest of stability on the Korean peninsula is often at odds with U.S. interest in denuclearization and the provision of basic human rights for the North Korean people. Moreover, North Korean leaders appear to have used this interest to neutralize their country’s growing economic dependence on China; the greater North Korea’s dependency, the more fearful Chinese leaders may be that a sharp withdrawal of PRC economic support could destabilize North Korea. Since the late 1990s, as long as North Korea has been able to convince Beijing’s senior leadership that regime stability is synonymous with North Korea’s overall stability, the Kim government has been able to count on a minimum level of China’s economic and diplomatic support, as well as some cooperation along their border region to ensure that the number and activities of North Korean border-crossers do not spiral out of control.

Beijing and Pyongyang are currently going through a period of amicable but strained diplomatic and economic relations following the negative response by Beijing to the DPRK’s nuclear and missile tests in 2009 and China’s support of new United Nations Security Council sanctions directed at North Korea. China also has been concerned that military provocations by the DPRK could trigger a shooting war on the Korean Peninsula. Beijing’s proposed solution to DPRK provocations has been more diplomacy and talks. China’s enforcement of U.N. sanctions against North Korea is unclear. China has implemented some aspects of the sanctions that relate directly to North Korea’s ballistic missile and nuclear programs, but Beijing has been less strict on controlling exports of dual use products. Chinese shipments of banned luxury goods to the DPRK continue to increase.

Date of Report: December 28, 2010
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The post-World War II U.S.-Japan alliance has long been an anchor of the U.S. security role in East Asia. The alliance facilitates the forward deployment of about 36,000 U.S. troops and other U.S. military assets in the Asia-Pacific, thereby undergirding U.S. national security strategy in the region. For Japan, the alliance and the U.S. nuclear umbrella provide maneuvering room in dealing with its neighbors, particularly China and North Korea.

U.S.-Japan relations have been adjusting to the Democratic Party of Japan’s (DPJ) landslide victory in the August 30, 2009, elections for the Lower House of Japan’s legislature. The DPJ’s victory appears to mark the end of an era in Japan; it was the first time Japan’s Liberal Democratic Party (LDP) was voted out of office. The LDP had ruled Japan virtually uninterrupted since 1955. Since the resignation of the DPJ’s first prime minister, Yukio Hatoyama, in June 2010, bilateral relations have been smoother under the leadership of Naoto Kan. Although in the past some members of the DPJ have questioned and/or voted against several features of the alliance, the party appears to have shifted its strategic thinking after a series of provocations from North Korea and indications of growing assertiveness from the Chinese military in disputed waters in 2010.

After the DPJ victory, bilateral tensions arose over the 2006 agreement to relocate the controversial Futenma Marine Air Station to a less densely populated location on Okinawa. The move is to be the first part of a planned realignment of U.S. forces in Asia, designed in part to reduce the footprint of U.S. forces on Okinawa by redeploying 8,000 U.S. Marines and their dependents to new facilities in Guam. After months of indecision and mixed messages from Tokyo, the Hatoyama government agreed to honor the original agreement, much to the dismay of the many Okinawans opposed to the base. Kan has voiced his intention to honor the agreement, although many concerns remain about its implementation.

Japan is one of the United States’ most important economic partners. Outside of North America, it is the United States’ second-largest export market and second-largest source of imports. Japanese firms are the United States’ second-largest source of foreign direct investment, and Japanese investors are the second-largest foreign holders of U.S. treasuries, helping to finance the U.S. deficit and reduce upward pressure on U.S. interest rates. Bilateral trade friction has decreased in recent years, partly because U.S. concern about the trade deficit with Japan has been replaced by concern about a much larger deficit with China. One exception was U.S. criticism over Japan’s decision in 2003 to ban imports of U.S. beef, which have since resumed, but on a limited basis.

However, the economic problems in Japan and the United States associated with the credit crisis and the related economic recession will likely dominate the bilateral economic agenda for the foreseeable future. Japan has been hit particularly hard by the financial crisis and subsequent recession. Japan’s gross domestic product (GDP) declined 1.2% in 2008 and 5.3% in 2009 and is forecast to grow 2.9% in 2010. At the same time, the United States is showing signs of recovery. The value of the yen has appreciated and has hit 15-year highs in terms of the U.S. dollar, which could adversely affect Japanese exports to the United States and other countries, contributing to the downturn in Japanese economic growth.

Date of Report: January 13, 2011
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